2012 (11) TMI 423 - AT - Income Tax

Penalty u/s 271(1)(c ) - CIT(A) deleted the levy - Held that - Issue regarding disallowance of addition of deferred revenue expenditure was set aside & G.P. addition made by the A.O. of Rs.64,25,615/- was scaled down to only Rs 17,74,615/- & estimation of turn over to Rs. 3.75 crores from Rs.5 crores and the rate of G.P. was also scaled down to 30% as against 32%. As decided in Jumabhai Premchand (HUF) Versus CIT 1998 (6) TMI 538 - GUJARAT HIGH COURT estimated addition is not sufficient for levy of penalty u/s 271(1)(c) - the addition in the assessment order is alright but in the proceeding for imposition of penalty, that fact alone was not sufficient and the burden was on the department to prove concealment of income which was not discharged by the department - in favour of assessee.

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) for assessment year 2003-04.

Analysis:
The Revenue appealed against the deletion of penalty under section 271(1)(c) by the ld. CIT(A)-XI, Ahmedabad. The A.O. had imposed a penalty of Rs.3,93,321 based on additions/disallowances made in the assessment, including excess depreciation, estimation of gross profit, and deferred revenue expenditure. The CIT(A) partially allowed the appeal, reducing the disallowance on gross profit estimation. The department and the assessee both appealed to the ITAT, with decisions pending. The A.O. levied the penalty based on the confirmed disallowances, leading to the penalty amount. The A.O. concluded that the assessee furnished inaccurate particulars of income, leading to the penalty under section 271(1)(c).

The assessee appealed the penalty before the CIT(A), who canceled it. The Revenue then appealed to the ITAT. The Revenue's representative supported the penalty order, citing a judgment from the Delhi High Court. The assessee's representative relied on a judgment from the Gujarat High Court. The ITAT reviewed the case, noting the additions made by the A.O. and the relief granted by the Tribunal. The ITAT considered the applicability of the Gujarat High Court judgment, which emphasized the need for the department to prove concealment of income for penalty under section 271(1)(c). The ITAT found that the estimated additions were not sufficient for the penalty, following the Gujarat High Court's ruling. The ITAT declined to interfere with the CIT(A)'s decision based on this judgment.

The ITAT disregarded the Delhi High Court judgment cited by the Revenue, stating that they are bound by the jurisdictional High Court's ruling. Consequently, the ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decision to cancel the penalty under section 271(1)(c).